Swiss Deposit Token Proof of Concept completed

The Swiss Deposit Token is a regulated, blockchain-based digital representation of Swiss bank deposits, designed to bring programmability and efficiency to traditional banking without creating new forms of money or crypto assets.

• Under the umbrella of the Swiss Bankers Association (SBA), PostFinance, Sygnum Bank, and UBS have conducted a Deposit Token feasibility study.
• The results report published today forms the basis for a standardised infrastructure for blockchain-based financial services in Switzerland.
• For the first time, banks have carried out a legally binding payment across institutions using bank deposits and a public blockchain – a milestone for the entire financial sector.
• Switzerland’s domestic payment system is already very efficient and cost-effective.
• However, it reaches its limits in new applications: traditional payments cannot be programmed, are not available around the clock for larger amounts, and can only be integrated into blockchain-based ecosystems to a limited extent.
• By representing bank deposits on the blockchain, payments could in the future not only be processed immediately and definitively on a shared infrastructure but also be integrated directly into automated business processes.
• Programmable rules (smart contracts) on this infrastructure enable payments to be executed only when certain conditions are met. This minimises risks, increases efficiency, and streamlines complex transactions.
• Such automation unlocks potential for new digital services: in future, customers could benefit from fast, secure, and transparent payment processes – whether in securities trading, the automatic settlement of insurance claims, or machine-to-machine transactions without human interaction.

The token offers

1. Universal usability and choice,
2. Deployment on a public chain with permissioned access, and
3. Legally binding settlement.

Each of the above principles points to inevitable structural requirements for tokenised infrastructure in capital markets:

1. Avoiding fragmentation (otherwise, what’s the point?),
2. Preserving counterparty choice,
3. Balancing transparency with compliance, and
4. Giving the market confidence that settlement is legally binding, definitive, and final.

Here’s a summary of the Swiss banking proposal for the Deposit Token:

What is the Deposit Token?

• The Deposit Token is a digital representation of a commercial bank deposit—not a new form of money, but a tokenised version of an existing liability (i.e., Swiss bank deposits).
• It is designed to be a blockchain-based payment instruction under Swiss law, avoiding the complexity of creating new money or crypto assets.
• The token acts as a standardised instruction to debit and credit traditional bank accounts, rather than a claim on a new digital asset.

How Does It Work?

• The Deposit Token is issued and redeemed by banks, with each token fully backed by a corresponding deposit in a traditional bank account.
• Transactions are executed on a public blockchain (with permissioned access), but settlement occurs off-chain via the Swiss Interbank Clearing (SIC) system.
• Smart contracts are used to automate and verify payment processes, enabling programmable, conditional, and cross-bank transactions.
• All transactions are subject to AML, CTF, and sanctions screening, ensuring compliance with Swiss regulations.

Key Features

• Not a stablecoin: Unlike stablecoins, which often represent new digital money or assets, the Deposit Token is a direct digital mirror of existing bank deposits.
• Programmable payments: Enables automated, conditional payments (e.g., escrow, settlement of tokenised assets, machine-to-machine payments).
• Interoperability: Supports transactions across multiple banks using a shared smart contract infrastructure.
• Legal clarity: Structured as a payment instruction, not a security or crypto asset, simplifying legal and regulatory treatment.

Benefits

• Faster, programmable payments: Real-time, automated settlement for complex transactions.
• Transparency and auditability: All transactions are recorded on-chain, with full audit trails.
• Integration with digital assets: Can be used to settle tokenised securities or other digital assets.
• Maintains traditional banking integrity: Does not disrupt the existing banking model, but enhances it with blockchain capabilities.

Limitations & Next Steps

• The current model relies on off-chain banking infrastructure and does not yet integrate fully with core banking systems.
• Future development aims to create native deposit tokens with on-chain master records for greater transparency and efficiency.

In summary:The Swiss Deposit Token is a regulated, blockchain-based digital representation of Swiss bank deposits, designed to bring programmability and efficiency to traditional banking without creating new forms of money or crypto assets.

References

• The Deposit Token https://www.swissbanking.ch/_Resources/Persistent/7/9/e/a/79ea024daa9834c99fc299db5d5f69c4317525a2/20250916_Ergebnisbericht%20PoC%20Deposit%20Token_EN_FINAL.pdf
• Milestone for the Swiss financial centre: Deposit Token Proof of ...https://www.sygnum.com/news/milestone-for-the-swiss-financial-center-deposit-token-proof-of-concept-successfully-completed/